For some people, bankruptcy is the only realistic way to clear their debts in a reasonable time.

Bankruptcy, like an IVA (Individual Voluntary Arrangement), is a form of insolvency. If you declare yourself bankrupt, your assets will be shared out among your creditors – but your outstanding debt will be written off and you'll get the chance to make a fresh start.

Bankruptcy: the advantages

• You'll know exactly when your debts will be repaid
• You'll be protected from any further action by creditors
• You will have no further obligation to repay your debts once discharged from bankruptcy (normally, 12 months after your bankruptcy begins)
• You'll be able to make a fresh start when your bankruptcy is over

Bankruptcy: the disadvantages

• Your home will almost certainly be sold (as may any other valuable assets) so the funds can go towards repaying your creditors
• If you work in certain fields, you may lose your job when you're declared bankrupt – if you're a local government councillor, for example, or a school governor
• Bankruptcy cannot write off certain debts, such as secured debts, student loans and court fines
• Your bankruptcy will appear in the newspapers
• Bankruptcy will affect your credit rating for the next 6 years

Bankruptcy: is it right for me?

Bankruptcy may be the best way for you to pay off your debts, but only if:

• Your disposable income is low,
• Your financial situation is unlikely to improve in the foreseeable future,
• You don't own many valuable assets (property, expensive car, etc.),
• There's no way you can repay your debt within a realistic timeframe, and
• You've already looked into the alternative debt solutions (see below).

Bankruptcy is a big step and should never be seriously considered until you've spoken to a specialist, who can help you decide whether or not it's right for you. Understanding the consequences of bankruptcy is only part of the question – you also need to understand how the alternative debt solutions work, and what their consequences are.

To talk to one of our expert advisers about bankruptcy, just call freephone 0800 970 7725 or fill in the call-back form on this page.